On June 4, 2018, the U.S. Department of Justice announced that Société Générale S.A. (“Société Générale”) and its wholly-owned subsidiary, SGA Société Générale Acceptance, N.V. (“SGA”), have agreed to pay over $1 billion in total penalties to U.S. and French authorities in connection with bribe payments to Libyan officials and manipulation of the London Interbank Offered Rate (“LIBOR”). SGA pled guilty on June 5 to conspiracy to violate the U.S. Foreign Corrupt Practices Act’s (“FCPA”) anti-bribery provisions. Société Générale entered into a three-year deferred prosecution agreement relating to charges of conspiracy to violate the FCPA’s anti-bribery provisions and conspiracy to transmit false commodities reports. As the first coordinated resolution by U.S. and French authorities of a foreign bribery case, the case highlights the increasing potential legal exposure for multinationals based on violations of the FCPA and anticorruption laws in other jurisdictions. The resolution signals that French authorities will actively exercise the authority they derive from the “Sapin II” anticorruption law, as also demonstrated by the recent bribery charges in France against former Havas chairman Vincent Bolloré. The resolution also underscores the potential benefits of cooperation, remediation and joint resolutions with multiple authorities.

Please click here to read the full alert memorandum.

One year ago, the U.S. Supreme Court ruled in Kokesh v. SEC[1] that the U.S. Securities and Exchange Commission’s disgorgement remedy constitutes a “penalty,” and is therefore subject to the five-year statute of limitations in 28 U.S.C. § 2462. As a result, the SEC can no longer seek disgorgement of ill-gotten gains older than five years. The SEC’s Enforcement Division has traditionally relied heavily on the agency’s virtually unfettered disgorgement power in its settled and litigated cases. As expected, Kokesh has forced the division to trim its disgorgement demands in certain cases and to abandon it outright in others. To date, however, the most dire predictions of Kokesh’s impact — that it would lead to the wholesale elimination of the SEC’s disgorgement power and place strict limitations upon other types of so-called “equitable” remedies — have not come to pass. That said, many of the issues commentators raised in the immediate aftermath of Kokesh have not yet percolated up through the appellate courts, and significant uncertainty concerning its full impact remains. What is clear, however, is that, absent congressional intervention, the SEC will face challenges in obtaining the full measure of ill-gotten gains in long-running, resource-intensive investigations.

Continue Reading Kokesh and Its Impact on SEC Enforcement, a Year Later

On May 30, 2018, the Federal Reserve Board approved a 373-page notice of proposed rulemaking that represents a first step toward simplifying and clarifying the Volcker Rule.

The other four agencies responsible for implementation are expected to approve the notice in the coming days. The linked alert memorandum provides a brief summary of our headline takeaways.

Please click here to read the full alert memorandum.

Earlier this week, CFTC Chairman J. Christopher Giancarlo announced the signing of a Memorandum of Understanding (MOU) intended to enable greater enforcement coordination and information sharing between the CFTC and state securities agencies.  The MOU formalizes a process for exchange of information and coordination between the CFTC, which has jurisdiction over the commodities and swaps markets, and state securities regulators and enforcers.  It continues the trend of increasing prominence of the CFTC’s enforcement division, and further reinforces connections with state authorities to promote cross-jurisdictional cooperation and coordinated enforcement action.  While the impact of the MOU remains to be seen, it is hoped that it will facilitate more coordinated and efficient enforcement proceedings in cases involving the CFTC.  At the same time, the provisions for information sharing reinforce the prudence of assuming that enforcement authorities speak to each other.  Therefore, companies facing possible investigations should ensure information provided to all relevant authorities is accurate and complete, and in appropriate cases may consider actively involving state securities agencies early on in order to potentially facilitate a later joint resolution. Continue Reading CFTC Chairman Announces Formal Cooperation Agreement With State Securities Agencies

The Financial Conduct Authority and the Prudential Regulation Authority (together, the “Regulators”) have jointly fined Barclays’ CEO, Jes Staley, a total of £642,430. The fine was imposed for Mr Staley’s repeated attempts to uncover the identity of an anonymous whistleblower, which constituted a failure to act with the due skill, care and diligence the Regulators expect from a CEO. The case was observed with interest as the first brought by financial regulators under the UK’s Senior Managers Regime. The Regulators chose not to impose more severe sanctions (which could have involved the removal of Mr Staley from his role) after failing to find that Mr Staley was guilty of any deliberate wrongdoing. Continue Reading UK Regulators Fine Barclays’ CEO for Errors of Judgement in Relation to Whistleblower

On May 9, Deputy Attorney General Rod J. Rosenstein provided remarks at the American Conference Institute’s 20th Anniversary New York Conference on the Foreign Corrupt Practices Act and announced a new policy designed to promote coordination and limit the imposition of multiple penalties on a company for the same conduct, which he referred to as “piling on.”

This memorandum highlights some of the most salient points from Rosenstein’s remarks, and describes the key elements of the new policy, with an eye towards potential implications for enforcement actions going forward.

On May 3, the Second Circuit vacated on evidentiary grounds Jesse Litvak’s conviction – after a second trial – on a single count of securities fraud related to trades of residential mortgage backed securities (“RMBS”) and remanded the case to the United States District Court for the District of Connecticut.[1]  This ruling is the latest setback for the government, as the Second Circuit in 2015 had vacated Litvak’s prior conviction on ten counts of securities fraud, one count of fraud against the Troubled Asset Relief Program (“TARP”), and four counts of making false statements to the government, following his first trial.[2] Continue Reading Second Circuit Again Reverses Fraud Conviction of RMBS Trader Litvak

On April 23rd, the European Commission adopted a proposal for a directive on the protection of whistleblowers reporting breaches of Union Law.[1]

The proposal sets out minimum standards of protection for whistleblowers against retaliation when they report breaches in specific policy areas.  The proposal is premised on the view that the lack of a common, effective approach to whistleblower protection across Member States can impair the enforcement of European law.[2] Continue Reading The European Commission Proposes new Rules to Strengthen Whistleblower Protection

On April 18, 2018, the Securities and Exchange Commission (“SEC”) proposed Regulation Best Interest under the Securities Exchange Act of 1934 to establish a new “best interest” standard of conduct for broker-dealers when making a recommendation of any transaction or investment strategy involving securities to a retail customer. The SEC also proposed an interpretation to reiterate and clarify the fiduciary duty applicable to investment advisers under the Investment Advisers Act of 1940. Finally, the SEC proposed a new disclosure form for investment advisers and broker-dealers to provide to retail investors.

In proposing the new Regulation Best Interest and the Guidance, the SEC has attempted to more closely align the standards of conduct applicable to broker-dealers and investment advisers while recognizing the fundamental differences between the services each provides and maintaining investor choice.

Please click here to read the full alert memorandum.

On April 25, 2018, a jury in the United States District Court in Connecticut acquitted former UBS AG (“UBS”) trader Andre Flotron of conspiring to manipulate the precious metals futures market through “spoofing.”  The verdict, the first acquittal in a criminal spoofing-related case since the practice was outlawed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010, reflects the difficulties the government faces in cracking down on the practice. Continue Reading Acquittal of Former UBS Trader Signals Potential Challenges for Government’s Anti-Spoofing Initiative